Companies see value in their own shares

Stock buybacks gaining momentum

Like others who were afraid to buy stocks when prices were tumbling early last year, U.S. companies are ramping up stock buybacks just as share prices zoom.

Share repurchases by Standard & Poor's 500 companies totaled $47.8 billion in the fourth quarter, up 37 percent from the third quarter. That's still far off the peak levels of two years earlier, when buybacks topped $170 billion, according to S&P.

For all of last year, companies repurchased $138 billion in stock, down from $340 billion in 2008 and the record $589 billion in 2007.

"Companies are getting back in the buyback mode, with many boards reauthorizing buybacks but adding that actions will be dictated by market conditions," said Howard Silverblatt, senior index analyst at S&P.

Over the last decade, buybacks have been a key component of bull markets. Fewer shares outstanding translate to higher per-share profits, which tends to push up stock prices.

But it remains to be seen how big a driver share repurchases will be in the near future.

Companies haven't shown anywhere near the same vigor for buybacks as in past years, S&P said. Indeed, much of the recent buying has come from companies repurchasing shares to offset stock options being exercised by employees after the market's recent advance.

Companies do, however, have plenty of cash that could be used to repurchase shares. And more than 50 companies had "notable" reductions in overall share count in the fourth quarter, S&P said.